Billionaire Ray Dalio has issued his starkest warning to date regarding the U.S. national debt, comparing the escalating crisis to an impending “economic heart attack.”
What Happened: Dalio urged the policymakers to return to the fiscal discipline last seen in the 1990s to avoid severe consequences. Dalio’s caution, conveyed through an X post and an interview with Fox Business, comes as the national debt approaches $37 trillion and the federal deficit continues to rise.
The founder of Bridgewater Associates described the nation’s deficit spiral in dramatic terms. “We’re spending 40% more than we’re taking in, and this is a chronic problem,” he stated on Fox Business.
He warned that rapidly increasing debt service payments are “like plaque in the arteries squeezing away buying power,” potentially leading to a critical point where new debt is issued simply to cover interest on existing obligations. This, he fears, could trigger a “systemic breakdown reminiscent of cardiac arrest.”
Dalio believes a solution is achievable through unity and determination, citing the 1991-1998 period as a blueprint for bipartisan problem-solving and balanced economic growth.
“If we change spending and income (tax returns) by 4% while the economy is still good,” he wrote on X, “the interest rate will go down as a result, and we’ll be in a much better situation.” He underscored that this kind of balance is “possible. It was done between 1991 and 1998.”
Why It Matters: While offering a clear path forward by suggesting the federal deficit be trimmed to 3% of GDP, Dalio expressed skepticism about the current political climate allowing for such necessary changes.
“My fear is that we will probably not make these needed cuts due to political reasons,” he wrote, cautioning that a failure to address the debt could result in a “serious supply-demand problem” for U.S. Treasuries, potentially catalyzing a global financial crisis.
In an X post from early July, Dalio had also warned that the new budget, with annual spending of $7 trillion against $5 trillion in revenue, will balloon the national debt to a staggering $425,000 per American family over the next decade.
Dalio had warned that without corrective action to reduce the deficit from 7% to 3% of GDP through spending cuts, tax hikes, or interest rate adjustments, severe economic disruptions loom.
“Unless this path is soon rectified to bring the budget deficit from roughly 7% of GDP to about 3% by making adjustments to spending, taxes, and interest rates, big, painful disruptions will likely occur,” Dalio warned.
Price Action: The SPDR S&P 500 ETF Trust SPY and Invesco QQQ Trust ETF QQQ, which track the S&P 500 index and Nasdaq 100 index, respectively, ended higher on Thursday. The SPY was up 0.033% at $634.42, while the QQQ advanced 0.21% to $565.01, according to Benzinga Pro data.
On Friday, the futures of the Dow Jones, S&P 500, and Nasdaq 100 indices were trading higher.
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